Job Displacement and Sectoral Mobility in New England Job Displacement and Sectoral Mobility in New England

Economic phenomena—such as the rise of automation or the recent COVID-19 pandemic—can result in lost jobs for long-tenured workers in New England and the United States. While reemployment in a different industry typically leads to lower earnings compared with same-sector reemployment for such displaced workers, sectoral mobility is almost certainly an attractive alternative to nonemployment and may offer additional benefits to some workers. The research in this report shows that successful sectoral mobility is further facilitated by additional general and industry-specific skills, and it is most relevant when business cycles and other factors increase the chance of nonemployment following a job loss. Policymakers interested in displaced-worker reemployment may wish to ensure that related legislation can facilitate industry changes, with consideration of skills training and differential vulnerability to nonemployment.

This report finds that broad patterns of job displacement and sectoral mobility for long-tenured workers from 1996 through 2019 are similar in New England and the United States. The study shows that being displaced increases the probability of changing industries by 59.8 percent within 15 months. This industry-switching effect grows as the time following a job separation increases. Additionally, pre-displacement education and industry structure facilitate post-displacement sectoral mobility. This finding suggests the importance of both general and industry-specific skills. The report also examines which factors cause displaced workers to be reemployed in the same sector after a job loss rather than nonemployed. Examining those alternatives to sectoral mobility, the analysis identifies several key individual and market influences, including business cycles, a worker's age, and the presence of any children in a worker's household.

Given the existing policy landscape, the findings of this report have multiple implications for related future workforce and economic development policy in New England. For instance, policymakers should keep in mind that sectoral mobility after job loss need not be viewed negatively. Rather, such industry switching might mitigate unwanted nonemployment and may be a necessary mechanism to reemploy displaced workers following harmful economic shocks. Additionally, to facilitate sectoral mobility, policies should encourage the accumulation of general skills—especially a high school diploma or equivalent—and industry-specific skills. Targeted acquisition of the latter skills may be aided by assessing which industry-to-industry transitions are most frequent and/or which industries have the greatest overlap of occupations or tasks.